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Unemployment insurance is one of the Nation’s basic Social Security programs. When Congress established the Old-Age and Survivors Insurance program in 1935, it also created the Unemployment Insurance (UI) program in titles III and IX of the Social Security Act. Although it has been subject to review and study over the years, the UI system received its first comprehensive examination through con...

This paper argues that unemployment insurance increases labor productivity by encouraging workers to seek higher productivity jobs, and by encouraging firms to create those jobs. We use a quantitative general equilibrium model to investigate whether this effect is comparable in magnitude to the standard moral hazard effects of unemployment insurance. Our model economy captures the behavior of t...

This paper investigates the feasibility and redistributive consequences of an institutional innovation: the replacement of the traditional unemployment insurance (UI) system by unemployment insurance savings accounts (UISA) – the scheme where each worker is required to save a fraction of earnings in his or her account, and draw unemployment compensation from it. By internalizing the costs of un...

Why unemployment has heterogeneous effects on subjective well-being remains unexplained. Using German Socio-Economic Panel (GSOEP) data, I find that both subjective and objective income measures mediate the negative effects of unemployment and explain its heterogeneous effects on happiness. This finding suggests that the root cause of the negative effects of unemployment is pecuniary. Policy im...

This paper characterizes the optimal labor market policy within a dynamic search model of the labor market which allows for workers’ risk aversion. In a …rst-best allocation of resources, unemployment bene…ts should provide perfect insurance against the unemployment risk, layo¤ taxes are necessary to induce employers to internalize the cost of dismissing an employee but should not be too high i...

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